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Pirate Bay deal surrounded by Hollywood-style headaches

Global Gaming Factory says it has the money to buy the file-sharing website. But Grokster ex-president Wayne Rosso quit his consulting post dramatically, and legal issues keep developing.

July 31, 2009|Dawn C. Chmielewski and Ben Fritz

The company that's hoping to turn Pirate Bay into a legal distributor of movies, TV and music says it now has the cash to purchase the online file-sharing hub next month, but it is already embroiled in some Hollywood-style infighting.

Swedish Internet cafe operator Global Gaming Factory, which agreed last month to buy the Pirate Bay website for $7.8 million, has commitments from more than 30 private investors to provide the approximately $4-million cash portion of the acquisition. The rest of the purchase is to be made in stock.

"We have all the investors, and all of the money is in place," said Hans Pandeya, chief executive of Global Gaming. "The only step left is our shareholders meeting" on Aug. 27.

Pandeya has largely bet the future of his company, whose shares trade for pennies on the Swedish stock exchange, on the Pirate Bay deal. As such, he has become concerned about a controversy involving a consultant he hired who has started bashing Global Gaming while speaking to the press.

Wayne Rosso, former president of the Grokster file-sharing service, joined Global Gaming as a consultant this month to help negotiate content deals with record labels and Hollywood studios. On Monday he resigned and publicly questioned the company's future.

"It became clear to me and my team that there wasn't a clear plan to move forward," Rosso said Wednesday. "I really don't know whether he's going to be able to get funded or not."

Pandeya said he was perplexed by Rosso's attacks, noting that the consultant abruptly left after just two weeks of work.

"He's calling the whole media world, making up a bunch of stories, and I don't know why," Pandeya said.

Pirate Bay has attracted interest from at least one other veteran of the file-sharing business: John Fanning, the former chairman of online music trading pioneer Napster and uncle of the site's founder, Shawn Fanning. John Fanning explored a potential investment in the Pirate Bay purchase, according to Pandeya.

Fanning did not respond to requests for comment.

Meanwhile, the Motion Picture Assn. of America has petitioned Stockholm District Court to stop Pirate Bay from making available illegal copies of movies, television shows, video games and other copyrighted works. The request follows the criminal conviction in April of four of the site's operators, Peter Sunde, Gottfrid Svartholm Warg, Fredrik Neij and Carl Lundstrom. They were ordered to serve one year in prison and pay nearly $4 million in damages.

In addition, a Dutch court ruled Thursday that Internet users in the Netherlands must be blocked from accessing the site, according to the Associated Press.

Neither legal move will affect Global Gaming, which is buying only the Pirate Bay name. Pandeya said that, presuming shareholders approve the deal on Aug. 27, his company is planning to immediately remove access to illegal content. He hopes to retain more than 10% of the site's users through a plan to compensate them for being part of a peer-to-peer network, giving them credits they can use to purchase legal downloads of movies, music and TV shows.

Other companies that have attempted to transition users from piracy to paid downloads, such as Napster, have had a difficult time, but Pandeya said he was confident that a significant fraction of Pirate Bay's 20 million-plus users wouldn't abandon it for other file-sharing hubs.

Even though the company hasn't yet signed deals with any studios or record labels, Pandeya said that once Global Gaming takes control of Pirate Bay, it will operate within the bounds of copyright law.

"We need to keep this fantastic culture and user experience. We think we have found a way to tweak the system to achieve this," Pandeya said.

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dawn.chmielewski@latimes.com

ben.fritz@latimes.com

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